You have just been told that there is a storage capacity issue.  Henceforth you will be allowed to keep only one measurement.  That's one operational, one financial, and one HR measurement. 

Which measurement would you keep?

For financials:  I think I would have to go with ROCE.  Return on Capital Employed.  It's pretty easy to calculate and tells you a good bit about the results of your efforts in the business.

For operations:  Hmmm.  I'm worried about cash flow, so I need to watch Days Sales Outstanding but that's not the whole picture.  I think I might just start watching my expenses per employee number.  That's pretty telling. If I can get a handle on the expense side of my business, I might also be able to improve the cash situation.  But that's a tough one.  Only one measurement huh? 

In HR: It has to be employee turnover.  No other measurement tells you more about your operation than the rate at which people flee. 

Now that you've imagined what it would be like to have limited options, you can sit down and take another look at exactly what you are measuring.  What insights are you gaining today?  Do you have so many different metrics,ratios and comparisons that you can't make sense of them?  Well start paring them down and see if it doesn't give you new insight.

One of the best books I have read lately is a book by Edward DeBono called Six Thinking Hats.  The book suggests an interesting technique that can be used in group decision making exercises.  It is easy to understand and easy to use but its results can be powerful. 

Each of the six hats have a different color designed to represent the perspective that its "wearer" is asked to adopt when approaching the issue at hand. 

The best way to find out your potential clients and customers want is to ask them.  Tools like Survey Monkey and Zoomerang have made that easy.  They manage the process and give you a good format for asking different types of questions.

The balance in Accounts Receivable at the end of each month is a telling number.  It is one of the key items that determines whether your business has any cash to spend.  And  should included accounts end up being non-collectible, they can take a big bite out of your profits for the year. 

So how to stay on top of this account?

Here are some suggestions:

 1. Measure - DSO, average days to pay and look for changes in trends
 2. Monitor - watch for balances by customer, including year over year sales comparisons for each customer
 3. Review your qualification process for adding new accounts - are you performing credit checks on new accounts?
 4. Look at your dispute resolution and error handling processes- inaccuracies in Order Entry are common causes of slow payment.
 5. Consider expanding your acceptable payment types - do you take credit cards or PayPal for example? Have you looked at onsite deposit processing systems like Heartland Express Funds?

 And if you really want to improve collectibility, you might consider contacting your customers before their payments are due, creating a customer portal where they can answer many of their own invoicing questions, and building in an automated process of communication.  Or you could implement a solution like www.cashcollector.com which does all of this for you. 
 

I was an employee of a software company.  I was in charge of Product Marketing for our ERP solution and my boss assigned me a special project.  The year-long assignment was to put together a team of people who could help move our DOS software customers to our current Windows product.  These faithful DOS customers had been using our product for more than 10 years without support, so this was not going to be an easy task. 

I was fortunate to have help from almost every department in the company and the support of our partners -we had a ball designing campaigns and coming up with a different twist for each quarter.   But here's where the cool part comes in.  The wonderful thing about the project was that we had an assigned unit objective and a way to see our performance against that goal. And we had complete control over a number of variables that impacted our ability to achieve the goal.  It was the perfect job- reasonable goals, with the right tools, measurable outcomes, and access to all of the people who would impact our ability to hit the target.  We designed special quarterly promotions, had a dedicated website, and got the job done.  I could run a report every single day and watch the results of any campaign or promotion.  And as the results rolled in, I could keep everyone informed of our progress. 

As you move up in an organization, the measurable, achievable stuff is few and far between.  Often you are given assignments and responsibilities with no way to really impact the outcomes.  Or you are given goals and can't monitor your progress against them.  Or maybe you know the variables, but you don't have the resources you need to change them.  You are assigned a target by someone in another country and then try your darndest to hit it.  But you don't really get much satisfaction out of the effort - whether you win or lose.

Wouldn't it be great if we could give everyone in every company accountability, the resources they need to get the job done, access to great tools, buyin from others who have a stake in the outcome, and measurable quarterly targets?  

I know what it feels like to watch the numbers exceed the target, quarter after quarter.  And to know that you made an impact. Those are the best days.  Every day should be like that.   

Created by the smart accountants at the Association of Certified Fraud Examiners, the museum is a great way to advertise their services and educate consumers about their expertise. It is an actual place that you might want to visit the next time you are in Austin, Texas.  Imagine the great marketing campaigns you can build around this concept. "Hire us to make sure you are not the next exhibit at the Fraud Museum! "

Since my husband is one of the few employees who retired from WorldCom, one of the exhibits is near and dear to my heart. It is a WorldCom stock certificate. Now I'm wondering if I should donate the photo of my husband and Bernie Ebers to the cause . I'm not sure I want my husband to be among the ranks of the famous at this particular museum, but at least it is a way to get some satisfaction out of the whole experience. 

The anti-fraud area of accounting has really taken off as a specialty in recent years. I'm not sure that is a good thing, but it is nice to know there are qualified experts you can call in the event you discover that there is something funny going on with your bank statements. 

According to an article titled "Financial management better than perceived" which is pretty ironic, members of the defense department including Homeland Security are having a hard time producing financial statements.

"In the case of Homeland Security, the four-year-old department is still struggling to merge multiple entities with separate finance and accounting systems and procedures." (Aren't there automated systems that can handle volumes of transactions and even consolidations?)

The article goes on to explain the difficulties in accounting for volumes of transactions and includes this insight from Relmond P. Van Daniker, the association's executive director,  "As professionals, we say that we exist to provide information so people can make decisions. I'm not exactly sure what decisions people make relative to the financial statements. They come out after the fact and they're very thick."  (Sound familiar? )

Here's the part that really resonates, from Defense Comptroller Tina W. Jonas, " Improving financial management at Defense hinges on showing military leaders and managers why it's important to their mission."

It seems that the Defense department shares a common problem with businesses : the troops can't follow if they don't know where they are going.  Like this department, accounting professionals have to help their teams see the relevance of financial information, especially those people who are on the front line. 

When times are tough, businesses that haven't been able to reach their revenue targets start reducing expenses. So where do they cut? 

Typically, companies large and small look to cut "non-crucial" expenditures like marketing.  Funds for travel, marketing campaigns and events start to shrink at the end of every quarter.  And what does that mean for sales?  It means that pipelines are going to start shrinking.  The flow of activity that drives sales opportunities suddenly turns into a trickle.  Without travel funds, teams start to be disconnected, customers start to lose touch with their salesperson and deals become harder to win.  What happens as a result is that marketing strategies put into place at the beginning of the year get disrupted and activities become a jumble of disconnected campaigns. 

Teams learn to execute early in the year and become accustomed to managing decreasing budgets.  Sales begin to dwindle in the quarter following the cuts, and it is not until 6 months into the new year that the activity can be regenerated.   By then it is time for a cycle of new budget reductions and more creative marketing. 

So how does the sales department deal with the reduction in their pipeline? See sales discounts, below. 

The problem is that declining revenues are a long term issue.  Usually the revenue problem is related to product strategy, to aligning with customer needs, to identifying a unique angle and executing well.  Trying to fix a problem like that by reducing a short term expenditure is like trying to run a skii resort using only man made snow.  You might be okay for a few days, but eventually you're gonna be skiing on dirt. 

I am a graduate of the University of North Carolina in Chapel Hill, NC (God’s country.) One of the reasons I remain connected to Chapel Hill has nothing to do with the university.  It is an incredible store located in Chapel Hill called A Southern Season.  The store has an amazing atmosphere and features delicacies from candy to cookies to cheese, wine, and chutney.  Everything they sell is unique, often has a humorous angle to it, and is always of the highest quality.  It is the kind of place where I would happily sweep the floors just to get a discount on the 46 ounce tin of Cinnamon-Butter Almonds.  

Since I now reside on the West Coast, it is a special treat for me to be able to share southern treats like “Carolina Cheddar Cheese Straws”, Crooks Grits, or country ham with the uninitiated.  But what is more important for me is the faith I have in this company to illustrate what southern hospitality is all about.  Every person you deal with at this company makes them look good.  The phone staff that handles orders is efficient, cheerful and exceedingly knowledgeable.  The online ordering system is a breeze.  The one time I had a problem with a recipient getting a broken bottle of wine, it was replaced immediately.  Excellent quality, unique products, and a well run operation combine to make this one of my favorite shopping experiences.  

But there’s more.  Last night I returned from a trip to Toronto to find a box from A Southern Season sitting on my desk.  Inside was a leather box filled with candy and a note thanking me for being “an exceptional customer.”  The note further reminded me of the approaching holidays  (bummer, I’m already late on my holiday shopping.) It also included a list of the people who had received gifts from me last year so I could easily re-order.

Even if I wanted to stop sending the delectable treats to my friends and relatives, they would not allow it.  It’s true.  Sadly, the Chocolate Covered Cherries and Chocolate Cordials from A Southern Season are now as much a part of our family tradition as the cheese grits soufflé, and are more prized at the dinner table than my husband.  

I know I’m not really an exceptional customer, but it sure was nice to receive an unexpected gift on an ordinary day and feel for just a minute or two that I was special.  

Wouldn’t it be great if every business could provide that same kind of feeling for their customers?

Many businesses describe their fiscal goals in terms of an increase in revenues, typically expressed as a percentage of growth.

Here is the interview I would like to conduct with a hypothetical business owner who has that goal.  

Me: So your goal for 2008 is to grow revenues 8%?

Business A: Yes

Me: So what if your costs grow by 15% during that same period?

Business A:  Well I wouldn't want that to happen.  So maybe my goal should be to grow revenues by  8% while keeping costs at the same percentage.

Me:  So let's say you increase revenues by 8%, hold costs steady but fail to collect on any of those additional sales.

Business A:  Um, well I guess I need to make sure that all of those new sales are collectible. 

Me:  Okay, so let's just say you grow revenues 8%, hold costs steady, and still manage to collect on the new receivables that you have generated.  All of your employees have just notified you that they plan to resign on the last day of your fiscal year.  What are your chances for success in the next fiscal year?

My point is, a revenue growth target is NOT a business goal.  Neither is any other single business metric.  Businesses are formed for an express purpose.  Annual targets should be in support of that purpose.  And why is growth always an objective? 

Of course businesses need to generate a decent return for the owner or investors.  But where is the business headed long term?  You need to know the goal before you even start to talk about supporting it with sales targets, budgets and compensation models.